Verizon to Offer $5 Billion for Spectrum if Auction were Held  

(Washington, D.C.) –  The Council for Citizens Against Government Waste (CCAGW) today asked the Federal Communications Commission (FCC) to scrap its plan to swap airwave spectrum with Nextel Communications at a below-market price.  The so-called Consensus Plan that the FCC may approve as early as Thursday aims to reduce Nextel’s interference with 800-megahertz emergency airwaves and in exchange provide the company more efficient and more valuable 1.9 gigahertz spectrum.  The plan would circumvent FCC policy and federal law that requires new spectrum to be auctioned off to the highest bidder.  Last week, Verizon Wireless stated that it would start its bid at $5 billion if an auction for the 1.9 GHz spectrum was held. 

“Verizon’s $5 billion bid shows just how much money the government is passing up, money that rightfully belongs to the taxpayers,” CCAGW President Tom Schatz said.  “This is a sweetheart deal for Nextel that puts rival carriers at a competitive disadvantage and hurts consumers and taxpayers.”

The value of the 1.9 GHz contiguous spectrum has been estimated to be worth as much as $7 billion if sold at auction.  However, Nextel’s plan would require the company to pay only $850 million and reband the 800 MHz spectrum.  It has been reported that several FCC commissioners already support the Consensus Plan but would require Nextel to pay an additional $1.3 billion to $1.5 billion.  That would still be less than half of Verizon’s starting bid of $5 billion.

“It is ironic that this plan could give Nextel nearly a multi-billion dollar windfall to ‘correct’ an interference problem it caused in the first place,” Schatz continued.  “While the plan purports to solve a public safety issue, it really is an attempt to obtain large portions of valuable spectrum at no cost.”

While Nextel proposes to relocate public safety bands elsewhere, the carrier admitted in its FCC filing that its plan would still not end the interference.  It is estimated to cost an additional $1.5 billion to $2.5 billion to remedy the interference problems.

“The use of competitive bidding for electromagnetic spectrum has returned some $14.4 billion for the taxpayers since 1994,” Schatz concluded.  “An FCC decision could be issued this week.  Hopefully, the agency will adopt another proposal that addresses the public safety issue without ripping off taxpayers.  If not, Congress should intervene.  Considering the $521 billion deficit, the government cannot afford to simply give away a valuable asset such as spectrum.”

The Council for Citizens Against Government Waste is the lobbying arm of Citizens Against Government Waste, the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.